29 December 2011

The double-nothings (the decade from 2000 to 2009) were the worst for job creation in half a century. From the 60s to the 90s, the economy created an average of about 2.5 million jobs per year. In the decade from 2000 to 2009, the economy actually lost an average of 100,000 jobs per year.

It seems to me that the central economic question is whether the last decade was an anomaly, an aberration for an economy still generally able to create jobs or ... if the last decade was a culmination in a downward spiral, further proof that our economy is sputtering on its way to stagnation.

If we just look at the raw numbers by decade, you can see that job creation was fairly stable until last decade.

Just looking at these numbers, it is easy to think that perhaps starting with 9-11, the US tumbled into a "lost decade" economically, hardly able to exceed the average of past decades in even its best decade. If that's the case, it is easy to believe that we'll have a return to norm, and that return will seem spectacular. Just an average year for past decades - creating 2 million or more new jobs - would be enough to lower unemployment by a point and change the mood of the country. And given aging baby boomers, this is is not an unreasonable forecast.

But these numbers are not adjusted for the fact that we have a larger labor force than ever. In the 1960s, we had half as many people working (or looking for work) as we do now. Scaling the above numbers to adjust for this (assuming that 1.7 million jobs in the 60s is equivalent to 3.4 million in today's economy, for instance), gives the graph a different shape.

This graph shows a downward slide, a steady worsening in our ability to create jobs. The narrative here would include factors such as the rise of emerging economies like China and India becoming more competitive with our own and making it more difficult for us to create jobs where labor makes (relatively) so much more. This story and graph suggest that until we hit some floor that puts us on par with other countries, we'll continue to struggle. Job creation won't keep up with growth in the labor force and unemployment will steadily rise. You probably have your own narrative to explain this.

Personally, I think that we're facing some hybrid of these two stories, but tend to favor the first story more. That is, I think that we'll continue to feel downward pressure on wages but I do think that the last decade was an anomaly in terms of job creation; I suspect that by the end of 2012, unemployment will be under 7.5% and during the next year we'll create 2 to 3 million new jobs. In other words, we'll create as many jobs next year as we did - on average - in past decades. And given what a terrible decade the double-nothings were, this "average" will seem spectacular.

Curiously, a great deal of our political differences can be captured by our aversion to risk. The thought that we should have universal health care is - at least in part - a question of how much risk we're willing to assume. If you get sick when you have no coverage, this could bankrupt you: in such a scenario, a temporary job loss could wipe out your assets.

Part of the question of how big a social safety net we should have is a function of empathy: do you want widows without children or anyone without work to have something other than bridges to sleep under. But part of it, too, is a function of our own optimism or uncertainty about our future: will we need unemployment insurance that lasts longer than 6 months at some point in the future, or food stamps for our kids in the event that our careers get de-railed by some massive restructuring of industries or technology makes a hard-earned skill obsolete. Do you want to live in a world without a safety net or support?

It would be fascinating to try creating a community that gave people the opportunity to choose which level of taxes and support they wanted. And then lock this in. (Say that you can choose temporarily at 18 and then have to choose permanently at 30.)

The community as a whole would pay for things like basic research, FDA, and defense, the benefits of which would not be experienced individually. After that, the options might look like this:
Pay 11% tax and have to pay for roads, education, medical, unemployment, and retirement.
Pay 22% tax and education, roads, and medical is now included.
Pay 33% and add to the above unemployment and retirement.

It would be curious to see polls of people asked what level of taxes and safety net they'd want if they knew they could not reverse it and could - in the extreme - end up homeless should things go poorly. If you knew that you could become "one of those people," would you be more likely to create a safety net for them?

23 December 2011

"One nation" was probably always more fiction than fact but perhaps one of the unintended outcomes of how the Internet allows many to many communication is that the "many nations" that compromise this country has never before been so clear. It is not just in the much reported polarization. The likelihood of Americans coming into work in the morning having watched the same news report, the same sitcom, read the same book, heard the same radio ... the likelihood of a shared reference has perhaps never been lower. We're not entering caves; instead, we're all seeming to move from under the bell curve to increasingly remote regions of the long tail.

As our diversity becomes more clear, I wonder what that will mean to our still relatively novel concept of nation-state. The recently departed Christopher Hitchens pointed out that it was only after Lincoln's Gettysburg Address that the term shifted from "the United States are" to "the United States is." About the same time that our own civil war settled the question of whether the united or the states portion of our country was more important, Germany and Italy were becoming nation-states. In the grand sweep of history, the idea of a nation-state is still relatively new.

Both the concept of nation and the reality of state are "made up, are social inventions. My bet is that it is the state half of this equation that is most likely to change first, though. And it'll be fascinating to see what new inventions come from that.

22 December 2011

One of the great mysteries of life is how we manage to waste so
much time in political debate, dialogue, and coverage on issues that are – at best
– of marginal importance. I think I finally found the answer to why in Daniel
Kahneman’s new book, Thinking, Fast and Slow.

One concept Kahneman shares has to do with our tendency to
substitute easy questions for hard ones. For me, this explains why so much air
time in politics is taken up with questions of little consequence.

Kahneman
gives an example of an analyst who bought stock in Ford. Asked why, the analyst
replied that he'd just been to a car show and left convinced that Ford
"sure can make great cars." As Kahneman points out, the real question
when buying stock is whether or not the stock is undervalued. But the analyst
substituted that difficult question for the simpler question of whether Ford
was making good cars. All of us, when faced with a difficult question, tend to substitute
a simpler - albeit irrelevant - one.

It seems to me that the big question in politics should be, How do
we improve quality of life for more people? That’s a big question and answering
it is one that isn’t easy. No one can feel confident about their ability to
answer it.

By contrast, the little and largely irrelevant questions – silly questions
best characterized by whether or not we should be able to burn the flag – are ones
for which we have clear answers as long as we have strong opinions. Answering
these questions leave us feeling confident in our own judgment. Answering the
big questions, by contrast, makes us feel uncertain. For most of us, we prefer
feeling confident to feeling inadequate. The result? We choose questions
because of how they make us feel rather than what their answers will do to
improve the world.

And that’s a pity. Just think what we could do with
all the attention paid to politics if it were focused on real, albeit difficult,
questions.

16 December 2011

The narrative on Newton Elroy Gingrich is that the man - for all his flaws - is very intelligent. More important than whether you believe that is the fact that Newt so obviously does. He trusts his own intelligence so much and the intelligence of others so little that he envisions a world where he is more dictator than president. This alone is enough to fear the consequence of his supposed intelligence. Worse, what he says suggests that he is not really that smart.

Could anything more clearly demonstrate how muddled his thinking than his stance on the judiciary and Federal Reserve? Sadly, pointing out the flaws in Newt's thinking requires explanations of longer than 2 minutes, which probably ensures his safety from any scrutiny in this age of media sponsored attention deficit disorder. But if you have five minutes ....

Let's start with the economy and what that implies for the Federal Reserve. There are only two ways that the government can influence the economy: through monetary or fiscal policy.

Monetary policy has to do with setting interest rates, growing or contracting the money supply, and changing banking regulations so as to make it easier or harder to get credit. Get this wrong and you can trigger a recession or inflation. The Fed is in charge of monetary policy.

Fiscal policy has to do with taxes and spending. Congress and the president are in charge of this and change it with their budgets and tax laws.

As it now works, the Federal Reserve Chairman (Bernanke now, Greenspan before) is in charge of monetary policy. He does not have to mediate negotiations between Republicans and Democrats or face the risk of presidential veto. He simply adjusts monetary policy based on his professional judgment about what is best for the economy. Politics does not enter into it.This makes his ability to respond to economic issues relatively easy and quick.

By contrast, fiscal policy has almost everything to do with politics and nearly nothing to do with economics. Chronic deficits are more product of Congress's political judgment than their economic judgment and any changes in tax rates or budgets result from prolonged and difficult negotiations between two very different parties.

So, what is Newt's solution to the "problem" of the Fed's independence from politics? He would fire the Fed Chairman. The impact of this, of course, is that it would make Fed Chairmen - and thus monetary policy - as politically driven as fiscal policy is now. The impact of that? Well imagine a world in which both tools of economic influence were subject to political ideologies and perceptions with little regard for economic realities. Imagine, that is, the Federal Reserve as ineffective as Congress.

Newt also wants to fire judges who disagree with him, even close entire courts that make rulings that he finds offensive. Not only is this an egregious attack on the separation of powers, it again suggests that even rulings on the interpretation of law would be subject to the political nonsense that has resulted in a single-digit approval rating for Congress.

Newt's reasoning skills are flawed and his mind continually distracted from considering consequences with the allure of shiny new thoughts. How anyone can conclude that "at least Newt's smart" escapes me.

In last night's debate, in defense of his inane idea to close courts with which he disagreed, Newt said that Thomas Jefferson did something similar. The proper response to that is, "I've read Jefferson. You, Newton Elroy, are no Thomas Jefferson."

07 December 2011

The older I get, the more convinced I am that we don't do enough to celebrate failure. Progress depends on it.

In January, one team will win the Super Bowl. The only reason they get to do that is because 31 other teams did not. In sports, nobody wins without someone losing. You can't hope for a win without simultaneously hoping for a loss. Loss is not due to lackluster effort, unimaginative creative visualization, or bad karma. Loss in sports is designed into the outcomes. Just like wins.

But sports is just made up. We don't have to have failure in the real world, you might say. We can, for instance, design an educational system in which everyone wins. Perhaps. But failure is still an essential part of life and is as vital to progress in the real world as it is to champions in the artificial world of sports.

Think about it. If history is any guide, sometime in the next year some people will start a new company destined for greatness - a company that will, in its prime, remind us of GM, IBM, or Google in theirs. But even more companies will flag somewhere between inception and this grand goal, will get buried in the landfill of failed expectations. Lots and lots of variables go into winners and losers and no one can be exactly sure which will make the next generation of winners win and which will make them lose.

If a community wants to be home to the next big company, it has to fund lots and lots of companies you'll never hear of. Uncertainty alone means that winners require lots of losers.

The same is true in the competition for the next generation of theories to explain psychology, cosmology, disease and everything else. Again, given that everyone has a shot at defining the next big theory, lots and lots of theories will have to be expounded in order for the few that move us forward to emerge. A million books will be published this year - yet only a tiny number will sell more than a million copies. And the list of such ensured failures goes on.

By definition, the vast majority of attempts to change the status quo will fail.

Yet the advance of history depends on these winners which - in turn - depend on these failures. To avoid failure is to avoid winning. Any community that doesn't teach its people that failure is inevitable, noble, and essential to progress risks having too few big wins.

And in the end, I wonder if failure or winning isn't somehow more random than we'd ever care to admit. Given this, perhaps it is worth remembering that you do what you do because of who you are, not because you really expect to "win." And maybe an increase in the portion of people doing this is the definition of progress.

06 December 2011

In the near future, theologians reading the King James version noticed what they concluded was the first use of emoticons. In Matt 6:

32(For after all these things do the Gentiles seek:) for your heavenly Father knoweth that ye have need of all these things.

Once they'd found the smiley face in the middle of the verse, theological debate ensued.

"What does this mean?"
"I think it is accidental."
"Do you explain away any inconvenient thing in the Bible this way?"
"How?"
"As an accident?"
"No."
"Why don't we just assume that this is the word of God and as such there are no accidents?"
"Well this is hardly the stuff of a Dan Brown novel."
"Let's not degrade this conversation with reference to fiction."
"So you suppose that this is serious?"
"Let's assume that it is. So what do we make of this?"
"Well, let's look at the context. It's the sermon on the Mount and Jesus is telling people not to worry about natural provision because God will care for them."
"So the smiley face is a happy, reassuring sign that lets people know that these temporal things are not so important. God will provide."
"Perhaps. But that wouldn't do much to explain the many people for whom God apparently did not provide - the untimely deaths, the starvation, the disease. It could be that this smiley face is the first instance of sarcasm."
"Please, Jesus was sarcastic?"
"Well, it would explain so much."
"Jesus is love. The smiley face is obviously an expression of joy."
"Ha! Sarcasm."
"Joy!"

And just like that, the discovery of the first emoticon created a new rift, a new schism in the Christian world. After the discovery of this first emoticon, the Christian world was still divided into Catholic and Protestant but each of those was further divided into sarcastic and hopeful. And perhaps it was the toll of thousands of years of observing human nature, the times, or an actual insight into reality but the new believers in God the Sarcastic were surprisingly numerous. It was - and remained - a curious world.

02 December 2011

In Obama’s first year, he presided over the worst loss in jobs
since the Great Depression, more than 5 million jobs gone. In spite of that, he
compares pretty well against Bush at the same point in his presidency – 34 months
in.

In spite of his miserable start, Obama actually compares
favorably with Bush.34 months in Bush had “lost” 2.3 million jobs whereas Obama
has “lost” 1.8 million. (And yes I agree that causes of job loss go back much
further than the prior month and that president’s don’t “create” jobs. I also
believe that there is no single variable
as important to this statistic as presidential policies.)

You might argue that Obama has, of course, spent a terrible
sum to improve on Bush’s bad record. And it is true that Obama had presided
over the biggest deficit ever. But if
you look at the rate by which he increased it, it isn’t that different from
what happened under Bush.

By the end of his third year, Bush had swung the deficit
negative by over $600 billion. By contrast, Obama has swung it negative by $800
billion. That is worse. And the total is huge. But still, it is plausible that
the story will be quite different for Obama by the end of his first term, in
comparison to Bush.

Comparing annual deficits in the fourth year of their term
with the deficit in the final year of the prior administration makes Obama look
good by contrast.

Bush had increased the annual deficit by $650 billion.
Current projections suggest that Obama will have increased it by $300 to 400
billion. It is not that Bush did better than Obama – he just had the good
judgment to make things worse from a far better starting point.

This should be good news for Obama’s re-election prospects.
If Bush could beat the Democrats – Kerry in particular – after a first term
that included job losses, a huge increase in deficits and the terrible tragedy
of 9-11, perhaps Obama’s shot at beating a weak GOP field – Romney in
particular – after a first year that included job losses, a huge swing in
deficits and the assassination of Osama seems reasonable.

01 December 2011

Here's an intriguing editorial by Nick Hanauer about why we should tax the rich more and poor less.

It reminds the reader that most of the debate about tax rates is more about moral judgment than economic policy.

There are cliched narratives that seem to color most discussions about tax rates.

Democrats argue that the rich are greedy crooks who raise spoiled children and the poor all had unfortunate childhoods and might still have recovered to become something if only they hadn't run into the fore-mentioned greedy crooks. Obviously, Democrats say, the rich should be taxed more and the poor should not be taxed at all - should in fact be given money from the rich.

And the Republicans, of course, argue that the poor made themselves that way by smoking crack and having babies out of wedlock and sleeping in the back of class and not brushing their teeth regularly. Meanwhile, the rich are all that way because they work harder, have saved more, and are generally someone you'd want to sit beside at jury duty. For this reason, Republicans argue, it just seems wrong to penalize the hard working rich folks in order to give their money to people who'll blow it all on beer and bingo.

Instead of focusing on judging the poor or rich, Hanauer focuses on a really practical matter. Rich don't spend money at the same rate that they earn it. If a community wants to grow the economy, it has to grow spending and a poor person will spend a greater portion of an additional $1,000 than will a rich person. (A fact born out by studies of marginal consumption.)
As Hanauer puts it,

"there can never be enough superrich Americans to power a great economy. The annual earnings of people like me are hundreds, if not thousands, of times greater than those of the average American, but we don’t buy hundreds or thousands of times more stuff. My family owns three cars, not 3,000. I buy a few pairs of pants and a few shirts a year, just like most American men. Like everyone else, I go out to eat with friends and family only occasionally."

So, unless you think that economic growth itself is immoral, the practical thing is to shift some money from those who save it to those who spend it.

In essence, a Korean record and entertainment company went public last week, and now has a market cap of over $300 million. Such things allow people to invest in a company, but what if you could invest in a band?

Imagine a site where you could "bet on" or invest in bands or artists. This could be just an online game site, essentially, but one that let people predict band popularity.

I think for lots of folks, the ability to quantify or show their ability to be a taste maker or trend spotter would be worth it. And there would be two ways to show how cool you were. The obvious way would be to have a high-value portfolio that showed your ability to spot the hot acts before they were hot. The less obvious way is to have a stagnant value for your portofolio, to show that you are a contrarian, uninterested in what's popular.

For the bands, it might be a vehicle for promoting new acts, letting them prove to clubs and promoters that they are indeed rising stars.

29 November 2011

It's hard to choose which of Edison's inventions was most impressive. He had 1,093 US patents for products as varied as the light bulb (which became a symbol of innovation), phonograph, radio, and even something akin to a motion picture projector.

I think that his biggest invention, though, was something completely different. As it turns out, Edison did not "invent" all these things. His really big invention was the first industrial Research & Development lab. Edison did not share credit with his employees and lived in a time when people were more ready to attribute inventions to a single genius than a group of cooperative scientists and engineers. What we think of as Edison's inventions were sometimes his own and sometimes his employees.

The R&D lab was a social invention that allowed a plethora of technological inventions. And Edison's lab became a model for in-house R&D labs that sprung up within modern corporations and universities that were themselves social inventions. With the R&D lab, we institutionalized technological innovation.

Technological
invention is a novel design that allows parts to do jointly what they could not
do on their own.

A social
invention is a novel design that allows people to do jointly what they could
not do on their own.

Both social (banks and stock markets) and technological inventions (steam engines and trains) have the potential to enable.

Edison's lab was not the first social invention that spawned so many technological inventions, though. In 1623, England passed a law that granted monopoly powers to technological inventors, what we now call patent law. Within a century, in 1699, the steam engine had been invented and the industrial revolution began.

The result of the industrial revolution? The first per capita increase in income in about 6,000 years. Social invention is as important to progress as technological invention.

In the West, we no longer violently resist social invention, as we did with the invention of new forms of church and government during the Protestant Revolution and democratic revolutions. We encourage social invention in the business world, encourage and reward entrepreneurs. What we don't do, though, is sponsor it. That is, in terms of social invention we are closer to the conditions for technological invention prior to Edison's R&D lab.

Given how much social invention can change and improve lives, perhaps it is time that we moved from merely tolerating or encouraging it to actually sponsoring it. And maybe the big social invention that could help with this is getting serious about turning our corporations into business incubators and changing the role of employee to something more akin to entrepreneur.

21 November 2011

There are only two questions Congress should consider: how do we create jobs and how do we raise living standards.

It is absurd to take on the question of how to reduce the deficit. With unemployment at 9%, it's stupid to raise taxes or cut spending. And given that unemployment is unlikely to drop to 6 to 8% before this Congress has finished its term, they can't make any progress towards deficit reduction anyway. Today's Congress cannot commitment a future Congress (if they could, the pre-Civil War Congress could have committed all future legislatures to uphold slavery).

Deficit reduction is a problem for tomorrow's Congress to solve. Job creation and GDP growth is a problem for today's Congress to solve.

The Super Committee failed to reach an agreement that would solve the deficit. So what. It would have all been promises that only future Congresses could have kept - and you can guarantee that those future Congresses won't be coming to Washington just to implement someone else's plan.

That deficit reduction during a recession has become such a huge issue is reminiscent of the push to invade Iraq. Austerity economics during a recession is an inane idea and yet we've somehow found ourselves unable to talk about anything but.

20 November 2011

Want to know one reason that daily papers face diminished readership? They focus on what the average person knows to be issues of diminishing returns.

Imagine someone making $40,000 a year.

In one scenario, they get a new president who lowers their taxes by 2 percentage points.

In another scenario, they get a new CEO who raises their salary by 2%.

The impact on after-tax income in the first scenario is about $100. The impact in the second is nearly $700.

And this does not even delve into the myriad policies changes having to do with issues like leave time, opportunity for advancement, equity sharing, and the ability to influence the (positive or negative) impact on the community.

Throughout the West, changes in management and policy at the level of employer will make a bigger difference than changes at the government level. And this belief about the diminishing returns to a focus on government policy vs. the advances that could accrue from a focus on corporate policy is one of the reasons that I wrote The Fourth Economy.

18 November 2011

Heisenberg's uncertainty principle adapted to politics:
You can make sense to people or you can make sense of the world. The more that you capture and explain the complexity of reality, the less you make sense to the electorate; the more that you make sense to the electorate, the less accurately you explain reality.
Thus, the tension between successful policy and successful politics.

16 November 2011

The GOP gaffes come so quickly that something that may have garnered attention in a normal year gets completely overlooked. For instance, in last Saturday's debate the sometimes lucid, sometimes inane Michele Bachmann indignantly demanded that Iraq compensate us for the expenses we incurred invading and occupying Iraq.

To put this in perspective, Iraq's annual GDP has risen to about $80 billion, still about $20 billion short of what we spend each year in the Iraqi occupation. So she not only thinks they should pay us back for all the bombs we dropped on them but she thinks that they could?

Not just a terrible idea but an untenable one. And perhaps that should be the motto of so many of these GOP candidates: our ideas shouldn't threaten you because there is no way they will even work.

14 November 2011

10 million hits for Jimmy Kimmel's video in which little kids were told by their parents that they'd eaten all their candy. Hilarious. I can hardly wait for the one next week in which people are told that their spouse has cheated on them. And then people at the doctor are told that they have cancer. Could be a whole series. Should be a riot.

Bernard had been drinking. His eyes were watery and his grin sloppy. He
was preparing for Thanksgiving with family. I was his designated driver. When
he is drunk, Bernard seems to be in one of two states - giddy or quiet. He'd
been quiet long enough that I thought I'd risk his becoming giddy by asking a
question. As it turns out, no topic is sober enough to counter a drunken
Bernard.

"Have you
noticed one thing that Socrates, the Buddha, and Jesus have in common?" I
asked.Bernard began to
chortle. "No! But I do know what John the Baptist and Winnie the Pooh have
in common," and then he dissolved into laughter."What," I
groaned."Same middle
name!" he doubled up in laughter, nearly hitting his head on the table.I was trying to
feign tolerance but in fact I had to laugh. "No," I shook my head.
"Although I guess this is true of Winnie and John as well. Have you ever
noticed that Socrates, Buddha and Jesus never wrote anything?""No,"
Bernard confessed."At least, as
far as we know. They just wandered around and taught people. And yet look at
how long their teachings have lasted," I said. "Look at how much
impact they have had on people's thinking for thousands of years."
“Same with Muhammed,” he called out from the backseat.
“What?”
“Muhammed didn’t write anything down,” Bernard said. “Add him to your list of
great, unpublished teachers.”
“Wow,” I nodded. “Socrates, Buddha, Jesus, and Muhammed.”"Oh,
Ron," Bernard giggled, "did you hear about Buddha's lost teachings?""No," I
replied."Everyone
knows that the Buddha taught that want is at the root of unhappiness," and
Bernard began to giggle some more. "Did you know what he taught is at the
root of happiness?""No," I
repeated."Wanton!"
And Bernard giggled at his wit. "Want makes you unhappy, and wanton makes
you happy! Get it?" And again he laughed. Bernard is, to his credit, a
cheery drunk.

"That's very witty for a man who slurs his words,
Bernard. But seriously, doesn't this call into question the whole model of
writing as a way to change people's thinking. I mean, doesn't this seem to you
like some kind of indictment of writing?""Maybe,"
Bernard bobbed his head while wrinkling up his bottom lip. "Or maybe it
just proves that you can't focus on getting published and changing the world at
the same time." And again he laughed.

Then Bernard sounded very sober. “Well think of this. Three major
religions – Jews, Christians, and Muslims – call Abraham their father and yet
he didn’t write a thing.”
“Abraham is another I didn’t think of.”
“And think of this,” Bernard said. “All three groups have given birth to
religious people who are considered ‘people of the book.’ That is, people who
define a great deal of their religion by reading scripture. And yet given none
of it would have been written in Abraham’s time, he couldn’t have defined his
religion that way. Maybe all three religions have killed religion by putting it
into books.” And then he giggled, throwing what I thought was a good insight
into doubt.

"I
guess," I said, actually considering the possibility that he was serious
in spite of his giddiness."Or it might
just prove that if you write things down you make your message harder for
future generations to co-opt and call their own. Precision makes popularity
less probable," he said with amazing precision for one so bleary eyed.
"If you want to be happy, be wanton with your words Wonald," he
laughed again. "And if you want to have an impact, don't write anything
down. Leave other people creative freedom to change your words so that lots of
people take ownership of them."

"Too
late," I said shaking my head. "I've written hundreds of blog
postings.""Ha!"
Bernard snorted. "You call that writing?." And then Bernard tilted
his head back and laughed loudly.

It's worth knowing where the rain falls and rivers run. But that needn't be the final word on the distribution of water. Irrigation was one of the first inventions to allow what we know as modern civilization.

Markets distribute profits and income. That's good to know, but it needn't be the final word on its distribution. Distribution of income may, in fact, be one of the things that first made civilization civilized.

07 November 2011

We can continue to try repairing the old economy or we can
create a new one.

Financial crises, stagnant wages, persistently high
unemployment, protests, and growing government deficits coinciding with a loss
of government jobs are all legitimate problems in their own right, but they are
more likely symptoms of something deeper. We’re living into one of the four
biggest economic transitions since the Dark Ages.

Since about 1300 CE. a pattern of social invention and
revolution has created three economies:
an agricultural, an industrial, and an information economy. And that
pattern is now repeating to create a fourth, entrepreneurial economy.

These changes we’re experiencing are different from normal
business cycles. This is bigger.

The last shift in the West – beginning around 1900 - took
us from an economy led by advances in capital to one led by advances in
knowledge work, a transition from an industrial to an information economy.

Progress from about 1700 to 1900 came from dramatic
increases in capital: steam engines, factories, stock and bond markets, and
banks were invented or recreated and the communities that increased capital the
most advanced the most.

Progress from about 1900 to the present followed from the
rise of knowledge workers: inventions like the modern university and
corporation, and radical advances in information technology helped to create an
information economy in which companies making virtual products often became
more valuable than those making “real stuff.” Communities that ignored the
question of how to create more knowledge workers and make them more productive,
and just focused instead on capital, were left behind. When the limit shifts so
must the focus.

The emergence of each new economy has forced a revolution
in the dominant institution. This is no small thing. The power of elites over
the institution is dispersed outwards. People once used as tools by the
institution begin to use the institution, instead, as a tool. “We are all
priests!” Martin Luther declared, overturning the notion that religion was
something to be defined by the pope. The first economy, from about 1300 to
1700, was catalyst to the Protestant Revolution. The second economy, from about
1700 to 1900, brought us democratic revolutions. The third economy, from about
1900 to 2000, democratized finance as knowledge workers’ pension funds and
401(k) funds came to define investment markets.

This new fourth economy will likely transform the
corporation – today’s dominant institution - in similar ways. Most obviously,
the role of the employee will become more like that of an entrepreneur.

The
simple, but sweeping, answer to the question of how to create more jobs is that
we need to become more entrepreneurial. The question of how we become more
entrepreneurial will first be answered within the corporation.

Depending on how one measures it, corporations make up
between one third to two thirds of the 100 largest economies in the world, yet very
few of them encourage entrepreneurship.

Developed countries are considered lands of opportunities
where people can expect to make more than heads of state. (About 6 million
Americans make more than Obama.) By contrast, corporate employees are about as
likely to make more than the CEO as past citizens of Iraq, Libya, or 17th
century France were to earn more than Saddam, Kaddafi, or Louis XIV. Such restraints
to opportunity and autonomy suggest huge gains could follow from democratizing corporations
and creating more entrepreneurial opportunities for the employees within them.

Our media and attention is fixated on political – and
sometimes financial – changes we could make to create jobs, but it may turn out
that such changes are merely incidental to the scope of the changes needed within
corporations.

Despite initial appearances, we’re living in a time of
incredible opportunity. Shifting our focus to overcoming the limit of
entrepreneurship will mean advances as dramatic – and at times as disorienting
– as those of the last three economies. (And if you’re a student of history,
you realize how very dramatic that is.) An entrepreneurial economy is ready to
emerge. Millions of new jobs depend on today’s communities redefining the corporation
as dramatically as past communities redefined church, state, and bank. The fourth
economy is ready to emerge but it’s not something we’ll see as long as we stay
focused on trying to repair the third economy.

Ron Davison has consulted to some of the world’s largest
corporations and is author of The Fourth
Economy: Inventing Western Civilization, available on amazon.com.

05 November 2011

This man I had was a simple, crude fellow - a character fit to bear true witness; for clever people observe more things and more curiously, but they interpret them; and to lend weight and conviction to their interpretation, they cannot help altering history a little. They never show you things as they are, but bend and disguise them according to the way they have seen them; and to give credence to their judgment and attract you to it, they are prone to add something to their matter, to stretch it out and amplify it. We need a man either very honest or so simple that he has not the stuff to build up false inventions and give them plausibility; and wedded to no theory. Such was my man; and besides this, he at various times brought sailors and merchants, whom he had known on that trip, to see me. So I content myself with his information, without inquiring what the cosmographers say about it.
- From The Complete Works by Michel de Montaigne, translated by Donald M. Frame.

04 November 2011

"Yes," he says, rather tentatively. "I'd like mine with more honesty, meaning, and love, please."
The guy at the counter - who strangely kept changing appearance almost like a shape in water, looking old and then young, blue skinned and then grey haired - just stared at him.
"Did you hear me," he finally asks.
The man - suddenly snapped into focus and looking like one of those apron wearing guys from 50s- style diners - laughed.
"You want more of this and less of that? Is that what you want?"
He could have sworn he heard a strong Brooklyn accent, which made this seem all the more surreal. "Well yes. Specifically, I'd like more honesty, meaning ..."
The guy at the counter interrupted with a wave of the hand. "I heard ya. I heard ya." And then he laughed.
"What? What's so funny."
"You think you're the first to want to change your order?"
He just stared. And then the man leaned across the counter and said, "You got two choices: either you choose life or you don't. The rest of it? You don't got that much choice about."
He stood there silent, now uncertain about what to do.
"So, what'll it be?"